Assessment Liens and Non-Judicial Foreclosure
Since the recent economic downturn, homeowner associations
have been faced with the problem of collecting regular assessments from
condominium homeowners. Effective
collections policies require a good understanding of the Davis-Stirling Act, of
the laws restricting the activity of debt collectors, and of the foreclosure process.
In the context of common interest developments, the nonjudicial foreclosure process involves a hybrid of processes mandated by the Davis-Stirling Act and other portions of the Civil Code and California law which are generally applicable in the context of foreclosure, as well as by case law. The process is complex, and failure to foreclose properly often results in time and resources wasted in the necessary work of correcting mistakes made in the foreclosure process and in attorney fees spent in litigation.
If you are a member of a homeowner association board or a property manager, you may be facing the problem of attempting to collect delinquent assessments. Collecting assessments begins with having a detailed collections process in place, approved as required by the Association’s governing documents, and scrupulously adhered to.
Most homeowners forewarned in the course of a properly implemented collections policy do not fall far behind in their payment of assessments. For those that do fall behind, and who are not able or amenable to catching up, it is imperative that the association stanch the bleeding of funds without delay. Associations that delay implementation of collections policy imperatives and/or the foreclosure process can face numerous problems. Because the foreclosure process is lengthy, while the decision to begin the process is delayed and unpaid assessments continue to accrue, the total amount of assessments due becomes greater than it otherwise would be. Failure to follow the policy and/or the process in a regular and consistent way may provide the homeowner a defense that he or she is being singled out; or contrarily, that he or she was under the impression that the association was waiving its rights.
While Small Claims is always an option, California’s crowded dockets ensure that the process will be somewhat prolonged. Furthermore, the expense of collecting judgments usually far outweighs the actual amount of the judgment. Thus, the most powerful and effective remedy available to the association is foreclosure.
For advice about how to create and implement an effective collections policy, and/or for assistance in the foreclosure process or small claims, or for questions about litigating against homeowners, please call me for an initial consultation.